Citi to exit, captive BPO units no longer attractive

The captive outsourcing story is turning sour .. or so it appears with the latest market buzz that Citigroup is on its way to pull out of its local business process outsourcing (BPO) unit Citigroup Global Services (formerly eServe).

While Citigroup continues to maintain that "the bank's policy is not to respond to market speculation," industry sources say "it makes logical sense for Citigroup to exit the business since it's not core to its operations".

The BPO currently has close to 8,000 people spread over two centres in Mumbai and Chennai. Some of the names floating to acquire the business include IBM, Automatic Data Processing (ADS), Infosys, EDS, Genpact, Capgemini and private equity players like Blackstone and General Atlantic.

When contacted, Genpact denied comment saying that it is in silent period. While IBM and Capgemini, too, maintained the no-comment stance, a senior Capgemini official, on condition of anonymity, said: "We have studied Citi Global services, it seems to be a decent company and has a good set up." The official, however, was concerned about the valuation of the Citi's BPO arm, which market rumours pegged at $1-1.2 billion.

Read more in The Business Standard article.

IBM, ADP, Genpact, Infy in race for Citi’s BPO biz

The first round of bids for Citi’s business process outsourcing operations — Citigroup Global Services (formerly known as e-Serve) — is likely to be completed this week. A host of global IT companies and also private equity firms are said to be in the initial race. However, Citi is likely to look at selling part of its operations only to a strategic partner, given the sensitivities involved in the deal.

According to sources, IBM, Automatic Data Processing (ADP), Genpact, Infosys and private equity firms such as Blackstone and General Atlantic are in the race for Citi’s BPO business.

Citi is likely to follow the Genpact model, where it is likely to sell off over 50% stake in the BPO firm. It is, however, likely to retain a part of the stake in the firm so that they can not only get the benefits in case of a future listing but would also handhold the firm. According to sources, one of the main reasons that the group is looking at bringing in a strategic partner is to bring down the overall costs and not monetising the stake.

Read more in The Economic Times article.